Chang Hwa beats the pack in setting up a China office

Chang Hwa Commercial Bank (彰化銀行) yesterday became the first Taiwan-based lender to open an office in China, a sign of the increasing integration of the two counties.

Founded in central Taiwan in 1905, the bank opened a representative office in Kunshan, 50km west of Shanghai. United World Chinese Commercial Bank (世華銀行) will also open an office this month and International Commercial Bank of China (中國商銀) is likely to get permission for an office in Suzhou, said Lin Xiaohua, governor of the People's Bank of China's Suzhou branch.

China has no diplomatic links with Taiwan, which it vows to one day control -- by force, if necessary -- though it imported US$24 billion of goods from the country last year.

Many Taiwanese companies are relocating factories to China, and financial and trading links between the two economies are developing faster than political ties.

"Chang Hwa Bank's opening of an office in China is part of an inevitable trend that Taiwanese banks must tap China's market to ensure growth," said Lin Tsui-pin (林翠萍), who helps manage Prudential Securities Investment Trust Co's (保誠投信) NT$125 billion in Taiwanese assets.

"Other banks will try to do the same."

Hua Nan Commercial Bank (華南銀行), First Commercial Bank (第一銀行), Chinatrust Commercial Bank (中國信託銀行), Land Bank of Taiwan (土地銀行), Taiwan Cooperative Bank (合作金庫) and International Commercial Bank of China are other lenders that have asked to open offices to serve the country's companies in China, which took a record 20 percent of Taiwan's exports last year.

"This signals progress in financial cooperation across the Taiwan Strait," China's central bank Governor Dai Xianglong (戴湘龍) said at a March 11 press conference, where he announced the new licenses for Chang Hwa and United World. "I also support our banks going to Taiwan."

China, which treats companies from Taiwan and its Special Administrative Region of Hong Kong as foreign firms, is handing out the licenses under commitments to open its financial industry to foreigners.

The licenses give the banks the ability to monitor client businesses in China, making it easier to assess loan requests.

After three years, foreign banks can seek to upgrade their licenses to full branch status, though China's central bank yesterday said Chang Hwa could apply for an upgrade in two years.

"By setting up here we help bring greater convenience to Taiwan investors and can draw even more Taiwan companies to this city," Chang Hwa Chairman Chang Po-shin (張伯欣) said.

About half of the 2,400 foreign companies operating in the city are from Taiwan, which has US$7 billion of capital invested in the area.

Perng Fai-nan (彭淮南), central bank governor, said yesterday that "parity" will be the key principle for the government to handle applications by Chinese banks to open liaison offices or branches in Taiwan. The central bank, the Ministry of Finance and the Mainland Affairs Council will jointly decide whether to approve relevant applications filed by Chinese banks, he said.